Q4 2013 Mortgage Arrears Statistics

By Seamus Coffey

March 4th, 2014

The Central Bank have released the Q4 2013 update of their mortgage arrears statistics

For Primary Dwelling Houses (PDHs), 12.6 per cent of accounts are in arrears of 90 days or more.  This compares to 11.4 per cent of accounts in similar arrears in the unaudited monthly data for December published by the Department of Finance

The Department of Finance figures cover the six banks operating under the Mortgage Arrears Resolution Targets (MART) process.  These banks (ACC, AIB, BOI, KBC, PTSB, ULSTER) provide 90 per cent of mortgage lending in Ireland so it is clear that the remaining 10 per cent of mortgages (from the former BOSI and INBS as well as the various sub-prime lenders) have a far higher arrears rate – somewhere around 23.5 per cent.  The 90-day arrears rates for the INBS and subprime mortgages are greater than 50 per cent.

In today’s Central Bank statistics we see the total number of PDH accounts in arrears continue to fall and for the first time there was a decline in the number of accounts 90 days or more in arrears. 

However, the situation of those in existing arrears continues to deteriorate with yet another significant increase in the number of accounts now 720 days or more in arrears (31,834 to 33,589). 

On average the accounts greater than 720 days in arrears are just under €42,000 in arrears.  Across the statistics there is an average of roughly 1.25 accounts per household.

The outstanding balance on mortgages in arrears fell from  €25.6 billion to €24.4 billion of which €18.2 billion are in arrears of 90 days or more.  The total amount of arrears rose from €2.17 billion to €2.24 billion.

The total amount of PDH mortgage debt continues to fall and is now at €107.4 billion, compared to €118.6 billion when the series began in September 2009.  However, it should be noted that the release mentions “asset sales” that took place over the quarter but it is not clear what impact these have on the figures.  The sales refer to mortgages that were sold by one of the reporting institutions, and are therefore no longer included in the statistics.

At the of December there were 84,053 restructured PDH accounts and 79.3 per cent were deemed to be meeting the conditions of the restructure.  There is a new table providing these rates by each type of restructure.

Reduced payment less than interest only (4,264) and arrears capitalisation (18,516 accounts) are the worst performing restructures for PDH accounts.  There were only 14 accounts granted a permanent interest rate reduction.

As expected the number of split mortgages continues to grow rapidly.  It increased from 1,154 in Q3 to 3,268 in Q4 and, with 96.3 per cent compliance, it is the best performing restructure for PDHs.  This is likely linked to the incentives built in to the restructure.  There are likely to be many more split mortgages coming through as there are 9,722 restructured accounts classed as “Other” most of which are “accounts that have been offered a long-term solution, pending the completion of six months of successful payment.”

There were 63 forced repossession in the quarter and 105 voluntary surrenders.

Court proceedings were initiated in 1,491 cases.  Up to Q2 2013 the average number of proceedings issued per quarter was around 250.  This increased massively in the second half of 2013.  During Q4, 258 court proceedings were concluded and 82 court orders for repossession were granted.  Of the 176 concluded by other means it is  probable that many of these see the borrower and lender enter a new arrangement through a restructuring of the original loan agreement with others ending by way of voluntary surrender/abandonment.

Data on the Buy-to-Let sector are also included in both releases.

Measuring Unemployment

By Brendan Walsh

March 2nd, 2014

My recent post on the results of the latest Quarterly National Household Survey (QNHS) provoked some discussion of the Irish unemployment data. I thought it would be helpful to follow up by comparing the evidence available from three measures of unemployment, namely, the Live Register (LR) and two series derived from the QNHS.

The LR data are based on administrative records of those ‘signing on’ for various entitlements, principally Jobseeker’s assistance and benefit. It also includes some people who are working short-time, as well as some seasonal and casual workers who are not fully unemployed, and some people gaining credited social welfare contributions who may not be actively seeking work. In fact Central Statistics Office in its monthly release of the LR figures warns that they are not designed to measure unemployment.

The QNHS is designed specifically to measure employment and unemployment. Similar surveys are conducted across the EU with the aim of providing internationally-comparably measures of labour market performance. The widely-quoted measures of employment and unemployment from the QNHS are based on International Labour Office (ILO) definitions. To be ‘ILO unemployed’ a person must in the week before the survey be without work but available for work and have recently taken specific job-search steps.

A separate measure of unemployment is also published in the QNHS, based on the concept of ‘Principal Economic Status’ – that is, what the respondent considers his or her ‘usual situation with regard to employment’ .

The following Figure shows how these three measures of unemployment have behaved since 2007.

(The LR figures are published monthly. Quarterly averages have been calculated for comparability with the QNHS data. The figures have not been seasonally adjusted.)

The most important showing is the broad consistency of the three measures, especially with regard to changes in the level of unemployment. There is no evidence of a trend in the divergences between the series.

As is to be expected the LR is consistently higher than the ILO measure of unemployment. The excess has varied from a high of 68 per cent in 2007 Q1 to a low of 36 per cent in 2012 Q2. There was a marked downward trend in the ratio between 2008 and 2012 – in times of rising unemployment the gap between the two measures narrows, but as the labour market improved from mid-2012 onwards the ratio has risen. ILO unemployment has fallen by 71,000 since mid-2012, the LR by only 54,000.

The PES measure falls consistently between the two other series, but closely tracks their movements.

In recent years both here and in the US increased attention has been devoted to ‘discouraged workers’ - people who are no longer seeking employment because they believe there are no jobs available. In response to the desire to improve the measurement of unemployment during the recession, a new series on the ‘Potential Additional Labour Force’ (PALF) has been presented in the QNHS. This includes ‘persons seeking work but not immediately available’ and ‘persons available for but not seeking work’.

Since it was launched, the PALF series has followed the same broad pattern as the three measures of unemployment shown in the Figure. Over the course of 2013 the numbers include in the PALF have fallen from 60,000 to 49,300.

Much further analysis could be performed on the these data. It would be interesting to look at the series by age and sex, for example. But suffice for the moment that all the available evidence paints a consistent picture of recent developments in the Irish labour market.

Some Very Positive Labour Market Numbers

By Brendan Walsh

February 28th, 2014

The results of the Quarter 4 2013 National Household Survey are available here.
The year-on-year increase in the numbers at work of 3.3% is all the more remarkable in view of the continuing decline in public sector employment.
The overall unemployment rate (seasonally adjusted) fell from 12.7% to 12.1%, and the long-term rate from 8.2% to 7.2%.

The future of the euro

By Kevin O’Rourke

February 27th, 2014

I have a piece on the subject in the most recent issue of Finance and Development, available here.

Production lags being what they are, I wrote the article in mid-December. Since then, Wolfgang Münchau has declared the Eurozone policy debate over (and not in a  good way); the German Constitutional Court has issued a ruling on OMT that is potentially much less benign than is commonly assumed; and Italy has installed its third non-elected Prime Minister in a row, with a notorious multiplier denier as Finance Minister thrown in for good measure. None of this has cheered me up.

University rankings, 2014

By Ronan Lyons

February 26th, 2014

Always a controversial topic, the latest university rankings by QS have been published. More details here. The aim is to identify the top 200, meaning something of an abrupt stop once they get to 200. (I feel the need to put a disclaimer here that I post this not because I stand over the ranking’s exact methodology, but rather rankings such as these are used by both prospective students and policymakers, hence they are important.)

Of interest to this readership, the ranking of Economics Departments in Europe is here. Trinity features in the 51-100 cohort and UCD in the 100-150. (Digression: nice to see a popular ranking recognise the bounds of uncertainty, although this may not be the best way to do it.) Six of the top seven Economics departments in Europe are British, with one each from Italy, Sweden, the Netherlands, Spain, Switzerland and France also in the top dozen.

9th-level Ireland has a handy table of Ireland’s top ranking departments across all disciplines from 2011 to 2014. Four departments (all in TCD) are in the top 50 in their discipline. A further 18 are in the 51-100 group (including three law departments).

Class divides and European integration, yet again

By Kevin O’Rourke

February 25th, 2014

This morning’s Eurointelligence briefing put me on to this article in Les Echos, which in turn led me to this Ipsos opinion poll. It contains several sobering findings, notably with respect to foreigners. But the finding that struck me most — since this is something I have been writing about for years now — is that a majority of French working class voters now want to leave the Euro. Indeed, only 34% of French workers think that EU membership is a good thing.

Isn’t it amazing how short run blips in various economic indicators can lead powerful people to assume that all is well with the EMU project? It is slow moving variables — long term unemployment, gradual shifts in public opinion, and so on — that pose the greatest threat to the Euro’s survival. If the far right does as well as people now seem to think it will in the European elections, this will presumably be presented in the media as a “shock” to the system, but has it not been obvious since 2010 at the latest that something like this was likely, given Eurozone macroeconomic policies? And has it not been obvious for years that actually existing EMU is harming the broader European project?

Europe’s political leaders should remember what Ernest Hemingway said about bankruptcy.

Ireland: The Kindness of Strangers

By Philip Lane

February 20th, 2014

The new issue of The Economist has a special report on “Companies and the State,” with Ireland featuring in this article.

The Troika and financial assistance in the euro area: successes and failures

By Philip Lane

February 20th, 2014

Bruegel report here.

Lending Where Banks Can’t, Blackstone Thrives in Ireland

By Philip Lane

February 19th, 2014

Landon Thomas writes in the NYT here.

Research Economist position at TCD

By Philip Lane

February 16th, 2014

Details via TCD jobs site here.   (Set competition type to Research and Department to IIIS.)

The Eiffel group: for a Euro community

By Kevin O’Rourke

February 14th, 2014

Here.

I dare say it will strike most people as pie in the sky, but it makes sense that people who want to preserve the Euro start formulating proposals such as this. Two reasonable conditions attaching to any such proposal seem to me to be that: (a) entry to any such community be decided by popular referenda in each country; and (b) that there be some sort of Connecticut compromise in place so that the rights of small states are protected.

Benoît Cœuré: Exchange of views on the ECB’s role in the troika

By Philip Lane

February 14th, 2014

here.

Mody on “Europhoria”

By Kevin O’Rourke

February 13th, 2014

Here.

IGEES launches new website

By David Madden

February 13th, 2014

The Irish Government Economic and Evaluation Service has launched its new website at http://igees.gov.ie/

Trinity Economic Forum 2014

By Philip Lane

February 12th, 2014

This student-run event takes place this weekend and features an excellent set of guest speakers: details here.

One of the speakers is Casey Mulligan (Chicago) - recent WSJ interview/profile here.

NERI Labour Market Conference: Call for Papers

By Philip Lane

February 12th, 2014

Details here.

The economic and fiscal contribution of US investment in Ireland

By Philip Lane

February 12th, 2014

This paper by Keith Walsh (Revenue Commissioners) is illuminating on the taxes paid by US firms in Ireland and explains the differences between Revenue-sourced tax data and the BEA-sourced data - here.

Effective Tax Rates

By Seamus Coffey

February 11th, 2014

The issue of effective tax rates, especially for the corporate income tax, rightfully continues to attract a lot of attention.  The front page of The Irish Times features a story by Carl O’Brien which is based on a recent paper produced by Prof. Jim Stewart.  The paper argues that:

“data from the US Bureau of Economic Analysis gives a more accurate estimate of effective tax rates for US subsidiaries operating in Ireland and elsewhere. This data shows that for 2011, US subsidiaries operating in Ireland have the lowest effective tax rate in the EU at 2.2%.”

The paper provides a useful critique of the World Bank/pwc report on effective tax rates but to argue that the BEA data tells us anything about effective tax rates in Ireland is wide of the mark.

For Ireland, the BEA data indicate that, in 2011, US companies here had $144 billion of net income and paid an affective tax rate of 2.2 per cent.  The low effective tax is correct but it wasn’t achieved in Ireland.

There is nothing close to $144 billion of US MNC profits in Ireland.  Such massive profit figures do not appear in the statistics produced by either the CSO or the Revenue Commissioners.  The gap between GDP and GNP is large but it is not that large. 

The post continues below the fold. Apologies for the length.

Read the rest of this entry »

Grattan PhD Scholarships at TCD Economics

By Philip Lane

February 10th, 2014

Thanks to generous donations from alumni, TCD Economics is offering some PhD scholarships. Details here.

Consumer Costs and Inflation in Ireland

By Philip Lane

February 7th, 2014

FORFAS report here.

German court refers ECB bond-buying programme to ECJ

By Philip Lane

February 7th, 2014

FR report here.

Irish Economy Conference Slides and Recordings

By Stephen Kinsella

February 7th, 2014

Sincere thanks to Geary’s Mark Hargaden who processed the recordings from last week’s conference. For each speaker there is an audio recording synchronised with the slide show. There is a separate link to slides only, for those who do not want to listen. Unfortunately, due to a technical hitch, we did not secure an audio recording from Paul Gorecki, but we do have his slides.

Here is the link, with recordings/slides linked to the programme.

We can see the evolution of the conference over the last three years from this site as well, with previous years linked here and here.

Ireland’s Report Card: February 2014

By Philip Lane

February 4th, 2014

here.

ECB makes progress with asset quality review, and confirms stress test parameters for comprehensive assessment

By Philip Lane

February 3rd, 2014

here.

Economics and Finance Teaching Before and After the Crisis

By Stephen Kinsella

February 1st, 2014

Brian Lucey and I conducted a survey of all university teachers of economics and finance in December 2013. A presentation of our findings is here (.pdf). Brian’s thoughts are here.

The main results from the sample of respondents are:

  • Teaching has not changed much in response to the crisis.
  • Attitudes to newer, or more critical material appear mixed at best.
  • Respondents emphasised the need for broader contextualisation and increased mathematical competence.We find it hard to see how to reconcile these findings.
  • EBA: Details on 2014 EU-wide stress test

    By Philip Lane

    January 31st, 2014

    here.

    Mody: The ECB is much too stodgy - the euro fuelled a leveraged bet that went bad

    By Philip Lane

    January 30th, 2014

    here.

    Squaring the Eurozone’s Vicious Circle

    By Philip Lane

    January 30th, 2014

    Garicano and Reichlin write here.

    ‘Hardball’ v ‘Equity Sale’

    By Seamus Coffey

    January 28th, 2014

    The Irish Times today features two contrasting strategies for dealing with the debt legacy created by the Irish bank bailout.

    An interview RTE’s Sean Whelan did with Willem Buiter is available here.

    Barrington Medal lecture

    By Ronan Lyons

    January 28th, 2014

    Yvonne McCarthy (Central Bank) will be giving her Barrington Lecture on Thursday evening in the ESRI. Full details here.

    The title, “Disentangling the mortgage arrears crisis: The role of the labour market, income volatility and negative equity”, gives an indication of its policy relevance.